John Hendricks

“The broadcasters said, ‘We’re not in the cable business.’ If they had stepped back and said, ‘We’re in the television business,’ they would have flocked into cable. I’m glad they didn’t.”

Wednesday, February 1, 2012 - 9:00am

To appreciate what John Hendricks has created, just spend some time watching his Discovery Channel. Consider, for example, the moment on the Curiosity show when Dr. Dunn rips a piece of tape off host Mike Rowe's eyebrow and finds what he is seeking: eyebrow mites. A closeup shot takes you deep into the world of these mites, so deep that one of Mike's eyebrows looks like the bole of a 2,000-year-old sequoia. You watch as the mites–fat little slug-like aliens able to squish their way into the tiny space between Mike's hair shaft and skin–pulse up and down as they gorge on hair follicle excretions.

Oh, yuck! But you keep watching, just as you can't stop watching other Discovery networks shows to see what the Mythbusters have uncovered or what TLC might teach you or what awesome portable weapon those clever boys at Sons of Guns have cobbled together in their incendiary workshop.

That is the magic that John Hendricks created when he founded Discovery Channel in 1985–but he didn't create it by magic. He had to spend a lot of time querying bemused TV executives about why the nascent cable networks included no documentary channels. Then he had to raise $25 million to launch Discovery under the radar of the clueless TV networks. A little more than 25 years later, Discovery Communications operates in approximately 200 countries and has 1.5 billion subscribers and 28 brands, including TLC, Animal Planet and HowStuffWorks.com.

Hendricks' own curiosity and love of the outdoors led him to buy 400 acres, which grew to 8,000, near the red rock canyon country outside Grand Junction, Colo., in the early 1990s, to create Gateway Canyons resort. The resort offers not only a traditional Western vacation in luxury surroundings but also some unusual opportunities. For example, guests can view dinosaur tracks or study brilliant night skies through a powerful telescope with the aid of a renowned scientist.

Hendricks also started Gateway Canyons Air Tours, so guests can take day trips to places like Aspen and Telluride. He maintains a grass airstrip on his property near Gateway Canyons, where he raises horses and bison.

What led you to create Discovery Communications?

My favorite kind of television was nonfiction. I was a work-study student at the University of Alabama and if [professors] wanted to show a 16-mm film, my job was to rent it. I had these [film] catalogs, and I knew there was this wonderful inventory of documentary products, but they weren't on television.

So you made some calls...

One was to a local broadcaster, but the guy just laughed at me. I called a cable operator and the general manager said, "Son, you don't understand. By law, we can only retransmit broadcast signals." The powerful broadcasting lobby had made sure that this cable technology couldn't compete with them.

In 1975 Time Inc. created a service called Home Box Office, where every night they would offer a movie. So broadcasters filed suit, saying it was against the law. The Supreme Court ruled that that law banning cable from providing its own content violated our First Amendment rights.

I remember seeing that in 1975, and that's when I realized, my goodness, there's going to be these very simple ideas, starting with a movie channel. Then Ted Turner did CNN in 1980. The year before, a guy in Connecticut created something called Entertainment Sports and Programming Network. ESPN.

Nobody was doing my favorite kind of TV. I got really obsessed in 1982 and incorporated the Discovery Channel. I was fortunate enough to find the investment backers that enabled me to pull it all together and launch in '85.

How much money did it take?

To be a cable network, you have to have a satellite transponder, and the lease was $336,000 a month. [That was] the biggest fixed expense and then programming [and] staff costs. We raised an initial $5 million and then a secondary round of $20 million. And we got Discovery Channel to break even within about two and a half years.

How did you find Gateway Canyons?

My father spent a lot of time in his 20s here and would regale me with stories of Colorado and Utah. He said there's this beautiful red rock canyon country west of Grand Junction. So in the early '90s, my wife and I started looking around. I remember looking in the Wall Street Journal, and it said, "Beautiful ranch for sale in red rock canyon country southwest of Grand Junction."

Our real estate agent was a pilot, and he picked me up at Grand Junction. We landed on this little dirt strip, and the sun was hitting the Palisade, and it was like, goodness, this place is like a national park. [My wife] Maureen and my son and daughter came out, and then we settled on the property. Since that time we've added the property here [Gateway Canyons resort], and a number of ranches, a lot of which we've put into conservation easements.

We decided to start exploring the potential for locating a resort here that had the mission of satisfying curiosity, which has been my mission with Discovery since the beginning. I think of this as kind of a place where the planet opens up to tell its story.

More recently we've started to experiment with a concept we call Discovery Retreats–knowledge retreats that are themed around a topic. Whether it's dinosaurs or secrets of the universe, we had experts fly in from around the country. And people could have a wonderful vacation but twice a day would be these incredible lectures.

What led to your purchase of one of the earliest NetJets shares?

It made sense, this new concept that [NetJets founder] Richard Santulli had created, fractional ownership. Our first plane at Discovery was a Citation II that I had a one-eighth interest in. We could meet well into the night and not worry about commercial flight schedules and then be able to return. This was especially important, as we had to meet with distributors all across the country as we were getting Discovery up and running.

We graduated from a Citation II to a Hawker 1000 and today Discovery has three shares in NetJets aircraft, including a Gulfstream IV that we'll use when we have larger group travel, or are going to Europe. We have a Citation X, and if we're taking short trips with two or three people, we use a Citation Excel. My wife and I, for years we've had our personal share, a 3/16th share in a Gulfstream 200. We're big believers in business aviation.

Owning a whole aircraft doesn't make sense for you?

[I like] the flexibility of a fractional share that can meet the mission profile. Plus, aircraft have maintenance issues, and that's another one of the advantages. NetJets has 800 aircraft. There's always going to be an aircraft within an hour or two of where you are.

Is travel time a good time to focus on work?

I use the aircraft time as work time. Now NetJets is putting Wi-Fi in the aircraft. You don't miss a beat.

Do Discovery's jet shares help with your international expansion plans?

NetJets allows you to trade up, and there was a trip all over China, meeting with authorities to introduce our content. It would have been hard to pull off the number of meetings that we had throughout China without business aviation.

How is Discovery dealing with the rapidly changing television landscape?

Television has gone through its third stage of evolution. [At first] the consumer had no control over it. What cable brought was a movie channel, sports channel, news channel, documentaries, content available 24 hours a day. This third stage is programs on demand. And the Internet will be a big way that satisfies that consumer demand for "I want to watch what I want to watch when I want to watch it."

The broadcast industry grew up with one stream of revenue: advertising. Those of us in cable, we've benefitted from having two streams of revenue. Every time you pay your cable or satellite bill we get 20, 30 or 40 cents per channel. And we get advertising on top of that.

As people go to the Internet for content, we have to try to keep those streams of revenue intact and develop additional means online either through advertising or a micro fee. We have to get paid for the content. One of the worries in our industry now is what's called cord-cutting. If [consumers] disconnect from cable or satellite, that's a huge loss to all of us on the network side. Because we depend on that for the bulk of our revenue. So we're [preparing for changes] slowly. For instance, Discovery provides some of our content on Netflix, Amazon and Google, and we'll soon follow with some television offerings.

Discovery today has revenue of close to $4.5 billion a year, and about $1.5 billion a year we get from the subscription license fee in the United States. It's important to keep that intact. The way to do it is what we call TV Everywhere. Where people are a Discovery channel subscriber and either a cable or satellite subscriber, we will offer them this add-on service of being able to watch anything in our library. Otherwise, we will disable the economic model that made the Discovery Channel possible.

These are key questions in our industry. What we can't do is make the mistake of some of the early broadcasters. Like ABC with Wide World of Sports and all of that history of sports programming didn't create a sports network. They ended up having to buy [ESPN] for an extraordinary amount. CBS could have done a Discovery Channel. They didn't properly define their business. They defined it with the technology of the time, as broadcasters. And I remember talking to some of the broadcasters about investing in cable. They said, "We're not in the cable business." If they had stepped back and said, "We're in the television business," they would have flocked into cable. I'm glad they didn't. They left all these opportunities.

Broadcasting is just a distribution medium, right?

Exactly. That's why I've been careful to educate our employees. Don't call us a cable network. That defines us with the technology. We've always said we're in the business of satisfying curiosity. We're technology neutral. Whatever technology comes along, we will play on that platform. We're playing on the tablet platforms, because if we're not there, there will be other entrepreneurs who will develop a Discovery-type service for the iPad.

Does that keep you awake at night, worrying about what some smart kid is planning?

Absolutely. We were the nightmare for the broadcast industry as we created all these cable channels. Today, the majority of viewing in America is cable networks rather than broadcasters. We have to be on the lookout for that next platform, and it's clearly going to be the Internet and the Internet also tied to these personal exploration devices. The iPad has really changed my life. It's the only device that I've ever taken to bed with me because I read my books on it. When I travel, I load up television shows so when I'm at a hotel I can just plug in an HDMI cable and watch on the big screen.

I started thinking how digital was going to change the way we deliver content. And I asked some engineers, how long would it take to send a book [to a television]? And they said, just seconds. So I started thinking, how could you get it to a readable form? I have the first patents on the electronic book. The problem is, the patent [filing] is dated '94, and they're good for 20 years [from that date], so we're almost running up to the end of it. We can't comment on the lawsuit, [but] we've been defending it. [In mid-November, Amazon settled the lawsuit, in which Discovery had charged that the Kindle and Kindle 2 had infringed on its technology.settlement terms were not disclosed–Ed.]

I designed [a device] about this size [indicates about the size of an iPad]. The problem was battery capacity. Fortunately, I thought about delivering not only through television to the set top beamed out to a device, but also through telephone and then cellular.

Is your legacy important to you?

I think the most rewarding thing is having participated in some effort to improve the human condition in the time we have on the planet. I've had the good fortune of being able to use the power of television to teach and now to experiment with organizing a place where people can come and learn about and touch their world.

Résumé

Name: John Hendricks

Birthdate: March 29,1952

Position: Chairman of Discovery Communications, which he founded in 1985

Previous position: Founder and president of American Association of University Consultants, which specialized in television distribution, marketing and fundraising for educational programs and services

Education: B.A., history, University of Alabama

Personal: Has a son and daughter with Maureen, his wife of 30 years. Has a pilot's license.

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Quote/Unquote

“When you get into the larger aircraft it becomes like a hotel, with dozens of staff supporting the plane based in a galley area down below. You have very comprehensive cooking facilities, and on larger aircraft we have looked at theatres, with spiral staircases and a Steinway grand piano. The limitations for what you can put inside a plane are pretty much the limits of physics, and even money cannot always overcome that. Even so, people are still always trying to push [the limits]. ”